NEW DELHI: The International Monetary Fund (IMF) on Tuesday slashed India’s economic outlook for financial year 2022-23 to 7.4%. The outlook has been revised down by 0.8 percentage point.
The forecast is sharply lower than IMF’s previous estimate of 8.2% for FY23. However, it is marginally higher than Reserve Bank of India’s (RBI) latest estimate of 7.2% growth rate for FY23.
In its latest World Economic Outlook report, the IMF projected India’s economy to grow by 6.1% in FY23-24.
“For India, the revision reflects mainly less favorable external conditions and more rapid policy tightening,” the report said.
India is projected to grow at a faster pace as compared to other developed economies like the US and China.
Global growth outlook slashed
Surging inflation and severe slowdowns in the United States and China prompted the IMF to downgrade its outlook for the global economy this year and next, while warning that the situation could get much worse.
It cut the 2022 global GDP estimate to 3.2%, four-tenths of a point lower than the April forecast, and about half the rate seen last year.
Last year’s “tentative recovery” from the pandemic downturn “has been followed by increasingly gloomy developments in 2022 as risks began to materialize,” the report said.
“Several shocks have hit a world economy already weakened by the pandemic,” including the war in Ukraine which has driven up global prices for food and energy, prompting central banks to raise interest rates sharply, the IMF said.
China’s economy is expected to slow dramatically in 2022, expanding just 3.3% — the lowest in more than four decades other than the 2020 pandemic crisis — due to Covid concerns and the “worsening crisis” in the property sector, the report said.
“The slowdown in China has global consequences: lockdowns added to global supply chain disruptions and the decline in domestic spending are reducing demand for goods and services from China’s trade partners,” the report said.
Even the US is projected to grow at a slower pace of 2.5% in FY23 as compared to a growth of 5.2% in FY22.
Ongoing Covid-19 lockdowns and a worsening real estate crisis have hindered economic activity in China, while the Federal Reserve’s aggressive interest rate hikes are slowing US growth sharply.
“Downgrades for China and the United States, as well as for India, are driving the downward revisions to global growth during 2022–23, which reflect the materialisation of downside risks highlighted in the April 2022 World Economic Outlook,” the report added.